Gracie Barra: Litigation & Risk
Health & Fitness · FDD Items 3, 4 & 5
Moderate: Review
1 case disclosed in FDD Items 3 and 4.
FDD Items 3 & 4
Litigation Metrics
- Cases disclosed
- 1
- Total from FDD Items 3 and 4
- Bankruptcy (Item 4)
- None
- Franchisor or officer bankruptcy
- Verdict score
- 80 / 100
- FranchiseVerdict composite · higher is better
- Rating
- A
- A / B / C / D / F verdict grade
7(a) FOIA data · FY2020–present
SBA Loan Performance
Aggregated from public SBA 7(a) loan disclosures. Charge-off rate is the share of loans that were charged off or settled for less than the full balance.
- Total 7(a) loans
- 16
- Government-backed loans issued
- Charge-off rate
- 0.0%
- vs 16% franchise average
- 5-yr charge-off rate
- 0.0%
- Defaults
- 0 loans
- Loans charged off or defaulted
- Total loan volume
- $7.9M
- Avg loan size
- $491K
- Participating lenders
- 12
FDD Items 5, 6 & 17: What You Give Up
Contract Risk Indicators
- Mandatory arbitration
- Required
- Disputes resolved outside court, limits your legal options
- Jury trial waiver
- Waived
- You give up the right to a jury trial
- Franchisor can compete
- Yes
- Franchisor can open competing locations in or near your territory
- Right of first refusal
- Yes
- Franchisor can match any purchase offer when you try to sell
- Governing law
- CA
- State whose law governs disputes. Relevant if you're not based there
Extracted from FDD Item 3
Litigation Detail
L.M. v Gracie Barra Franchise Systems, Inc. et al - pending in New Mexico; vicarious liability claim arising from alleged sexual grooming and assault at franchised location
What drove the 80/100 verdict
Risk Score Breakdown
- 01HIGHActive litigation involving vicarious liability for sexual assault at franchised location creates significant legal and reputational risk
- 02MEDNo Item 19 financial disclosure (Avg Revenue and Net Income not disclosed) prevents accurate ROI analysis on $76k-$233.5k investment
- 03MINORModest unit growth of 9.0% YoY is below industry standards for martial arts/fitness franchises, suggesting market saturation or underperformance
- 04MINORLow royalty structure ($600-$900/month) indicates weak franchisor support infrastructure relative to franchisee investment size
- 05MINOR5-year term is shorter than industry standard (typically 10 years), creating renewal uncertainty and unstable long-term planning
Severity inferred from FDD text. Not a regulatory or legal classification
Litigation data from FDD Items 3, 4, and 5. SBA data from public 7(a) FOIA records (FY2020–present). Not legal advice. Consult a franchise attorney before signing any franchise agreement.